Budget 2025| What individual taxpayers hope for — an EY tax perspective

Among the key expectations for Budget 2025 is a revision in the basic exemption limit under the Concessional Tax Regime (CTR), with a potential increase from the current ₹3 lakh to ₹5 lakh. Additionally, there is anticipation that the government will re-evaluate and optimise the tax rates under both the old tax regime and the CTR to offer more balanced and beneficial options for taxpayers.

Many of the salaried taxpayers stay in a rented accommodation. Under the old tax regime, the salaried individual receives exemption up to 40% to 50% of salary, towards rent, depending on the city. Bangalore, Hyderabad, Pune, Gurgaon are some of the cities where there has been exponential growth of migratory population for work, be it highly skilled or semi/ unskilled. It is prudent that in the upcoming Budget, these cities  be classified as metro cities for  allowing higher exemption for rent paid at 50%.

Currently, under the old tax regime, the interest on housing loan is allowed to be set-off with other sources of income for an upper limit of ₹2 lakh. It is expected that the government will relook at the upper limit and increase the same for set-off.

To reduce  carbon emission and manage the global warming, electric vehicles are considered as an alternative approach. Currently, the income-tax provisions provide the perquisite calculation in the case of motor vehicle run by fuel and no specific valuation mechanism is provided for electric vehicles. It is expected that the government will provide clarification for perquisite valuation where a two-wheeler or a four-wheeler electric vehicle is provided by employer to employee. 

It was a well appreciated decision where the government formally recognised Virtual Digital Assets (VDAs). However, the loss from VDA is not allowed to be set-off from gain from other VDA or any other source of income. It is expected that the government would include provision for set-off of loss from VDA. It is also expected that the current tax rate of 30% would be revisited.

Employee Stock Ownership Plans (ESOPs) are one of the most attractive remuneration elements for all the companies. Currently, the deferral for tax payment for ESOPs till the stage of sale is allowed only for certain start-ups. It is expected that the benefit of deferment of tax payment for ESOPs will be considered for all companies.

Provident Fund (PF) has always been one of the most sought retirement investments by the salaried individuals. However, the interest on employee’s contribution more than ₹2.5 lakh is considered as a taxable income. This provision impacts the individual as the tax is required to be paid on such income which is to be utilised by the employee later. It is expected that the government would defer the taxability of interest on provident fund, at the time of withdrawal.

The current due date for issuance of Form 16 is June 15 and filing of the original income-tax return is July 31. The Annual Information Statement and Tax Information Statement updates generally takes time and is often updated in July. These altogether  provides a very short window to a salaried taxpayer to collate all the documents and file the income-tax return. It will be helpful if the government relooks at the timeline for filing of the original income-tax return.

The deadline for filing of the revised or belated return was amended to December 31 (earlier it was 31 March). This has a major effect in case of mobile employees as in many cases, such employees are not able to claim foreign tax credit for the taxes paid overseas since the overseas tax return is filed after completion of the calendar year. It is wished that the government consider the undue hardship faced by the taxpayers and revert to the previous belated or revised tax return filing deadline.

The above fiscal and procedural changes will have a balance of both benefit to the individual as well as not so much amount of revenue forgone by the exchequer and introduction of the same will be much appreciated.

—The author, Shuddhasattwa Ghosh, is Tax Partner, EY India.  Rahul K Agarwalla, Director- tax, EY India, also contributed to the article. The views are personal.